Brief comment on performance
In 2018, the income was 14.3 billion yuan, + 13.58% compared with the same period last year; the net profit was 752 million yuan, + 10.98% year-on-year; and the non-return net profit was 314 million yuan,-22.85% from the same period last year. Since the second half of 18 years, under the multiple effects of the Sino-US trade war, weaker domestic downstream demand and weaker domestic cotton prices, the growth of the company's yarn business orders and network chain business have slowed down. 2019Q1 achieved revenue of 3.634 billion yuan, + 19.78% year-on-year, downstream orders showed a slight recovery, is expected to improve quarter by quarter; net profit of 172 million yuan, year-on-year-21.47%; non-return net profit of 89 million yuan, year-on-year-35.10%.
In 2018, the company's yarn revenue reached 7.222 billion yuan, + 22.7% compared with the same period last year; revenue from the network chain business reached 7.017 billion yuan, + 7.32% compared with the same period last year. Main yarn, the company has formed Zhejiang, Huanghuai, the Yangtze River, Xinjiang, Vietnam five production regions. In the past 18 years, the company further optimized the production capacity layout and transferred the production capacity of the two factories in Ninghai and Yuyao, Zhejiang Province, to the west. Xinjiang increased by 150,000 spindles, with a total net increase of 90,000 spindles to 1.89 million spindles. Looking forward to 2019, the company is expected to increase its domestic production capacity of about 100000 ingots, and strive to achieve an additional production capacity of 150000 ingots in Vietnam by the end of the year.
The gross profit margin and net profit margin of 18 years and 19Q1 declined, and the inventory turnover days increased in 18 years: the comprehensive gross profit margin of 18 years was 10.52%, and the net profit rate was 5.27%. The comprehensive gross profit margin of 19Q1 company was 10.44%, year-on-year-1.51pct. The decline in gross profit margin was mainly related to the rapid growth of net chain business with lower Q1 gross profit margin, reaching 33%; net profit margin was 5.03%, year-on-year-2.52pct. The 18-year and 19Q1 sales expense rates were 1.68% and 1.53% respectively, compared with-0.48pct and-0.29pct, respectively; the management expense rate (including R & D expenses) was slightly stable; the proportion of other income (government subsidies) decreased compared with the same period last year, with 18 years and 19Q1 being 2.55% and 1.81% respectively, compared with-0.41pct and-1.93pct, respectively.
Inventory turnover days increased in 18 years, while in 19 years, the company will focus on production and sales balance: inventory turnover days in 18 years were 145 days, an increase of 25 days compared with the same period last year; accounts receivable turnover days were 20 days, down 3 days from the same period last year; accounts payable turnover days were 19 days, down 11 days from a year earlier. 19Q1's inventory turnover days were 158 days, down 8.6 days compared with 18Q1, accounts receivable turnover days were 21.16 days, down 4.59 days year-on-year, and accounts payable days were 11.11 days, down 22.37 days year-on-year.
Investment suggestion
It is estimated that the company's net profit from 2019 to 2021 will be 835 million yuan, 933 million yuan and 1.043 billion yuan respectively, and the current market capitalization corresponding to PE is 13, 12 and 10 times respectively.
Risk
Raw material fluctuation, government subsidy fluctuation, order fluctuation, exchange rate fluctuation.